Global EV Adoption And Renewables Will Expand Battery Demand

Key Takeaways

• Superior global scale, capacity agility, and first-mover advantage in LFP ESS production position the company for outsized market share and sustained margin gains.
  
• Diversified pre-sold order book and advanced next-gen technologies provide strong earnings stability and pricing power amid industry and regulatory shifts.
  
• Regulatory hurdles, aggressive competition, customer concentration, heavy capital commitments, and rising battery recycling trends threaten long-term revenue growth, profitability, and earnings stability.

Catalysts

Provides energy solutions worldwide.

• While analyst consensus sees asset reallocation (like the GM JV Lansing site) as a tool for efficiency and margin stability, the scale and agility of LG Energy Solution's global footprint and rapid capacity conversion capability suggest the company could materially accelerate market share gains, driving both volume growth and outperformance in operating leverage well beyond current forecasts.
  
• Analyst consensus expects local North American ESS production to position the company for share gains and margin security, but LG Energy Solution's unique first-mover status in LFP ESS production-coupled with a surging AI-driven data center expansion-could exceed expectations, allowing recurring multi-year revenue beats and structurally higher margins as rivals struggle to comply with localization requirements.
  
• The rapid commercialization and mass production of breakthrough next-gen chemistries (high-voltage mid-nickel, LFP, LMR, and solid-state), together with advanced dry electrode and fast-charging technologies, positions the company to capture product-mix shift toward premium batteries with higher pricing power and margins, structurally improving net profitability.
  
• LG Energy Solution's massive pre-sold order book (already above 50 GWh and growing) and unmatched customer diversity across automotive, utility, and new mobility sectors serve as a hedge against sectoral volatility, providing superior revenue visibility and long-term earnings stability even amid cyclical industry swings.
  
• Policymaker-driven tailwinds-including strict sourcing constraints on Chinese competitors and escalating global incentives for clean energy and storage-are accelerating industry consolidation, and LG Energy Solution's leading local capacity and cost-competitive supply chain are likely to drive step-changes in market share, scale advantages, and sustained double-digit earnings growth.

LG Energy Solution Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on LG Energy Solution compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming LG Energy Solution's revenue will grow by 24.2% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from -3.9% today to 11.1% in 3 years time.
• The bullish analysts expect earnings to reach ₩5346.8 billion (and earnings per share of ₩22819.0) by about September 2028, up from ₩-989.7 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 30.6x on those 2028 earnings, up from -80.5x today. This future PE is greater than the current PE for the KR Electrical industry at 24.2x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.55%, as per the Simply Wall St company report.

LG Energy Solution Future Earnings Per Share Growth

Risks

• Intensifying global regulatory complexity, including early termination of key EV subsidies in the US and more stringent local content rules, is likely to dampen long-term EV demand and increase compliance costs, putting downward pressure on revenues and margins in major growth regions.
  
• Heightened competition from Chinese battery makers, particularly in Europe's mid
• to low-end EV segment, threatens to erode market share for LG Energy Solution, particularly as customers shift toward lower-cost alternatives, which may result in weaker revenue growth and lower profitability over time.
  
• Persistent dependence on large customers in the automotive sector-such as GM and other major OEMs-means that any strategic shift or inventory management decisions by these partners could cause significant swings in revenue, increasing the risk of earnings volatility and potential revenue declines.
  
• Heavy capital expenditures required for capacity expansion in North America and Europe, coupled with ongoing variable demand and conservative customer inventory management, create a risk of underutilized assets, which could depress net margin and free cash flow if growth projections are not met.
  
• The global trend towards battery recycling and second-life battery deployment, combined with the company's own efforts in this space, could structurally reduce long-term demand for new batteries, potentially capping future revenue expansion and putting at risk future earnings growth.

Valuation

• The assumed bullish price target for LG Energy Solution is ₩531000.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of LG Energy Solution's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ₩531000.0, and the most bearish reporting a price target of just ₩258700.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be ₩48166.9 billion, earnings will come to ₩5346.8 billion, and it would be trading on a PE ratio of 30.6x, assuming you use a discount rate of 9.6%.
• Given the current share price of ₩340500.0, the bullish analyst price target of ₩531000.0 is 35.9% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.